Thanks, Reinsurance: Colorado Premiums to Drop By 18%

[TexasTowelie]

6. The reinsurance market is not regulated at either a state or federal basis

other than general corporate law so they do not conform to the regulations of the ACA. They usually does not provide direct coverage for policyholders, although there might be an exception for self-insured companies which is not something found very frequently regarding health care coverage.

Reinsurance contracts can be based on various contract provisions such as insuring a set percentage of claim losses, reinsuring entire books of business for multiple policyholders, reinsuring by state jurisdiction, reinsuring amounts in various tier layers (e.g., >$10M and <$25M). The premiums vary depending on the contract established between the company writing the direct business and the reinsurer. It is possible that a book of business could have more than one reinsurer assuming a portion of the risk.

The benefit of having reinsurers is that it helps spread the risk so that companies remain solvent if there is a calamitous event. It also provides direct insurers with larger underwriting capacity so that they can insure more policyholders and provide policies with higher coverage limits.